Crown

REPORT: Porsche facing dire times, actually skirted bankruptcy in March

Whatever happened to Porsche ?  Did WW get too cocky and thought his ideas would be invincible ?
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Happy Driving

From Der Spiegel:

http://www.spiegel.de/international/business/0,1518,626666,00.html

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It's not where you're going, it's how you get there that counts

A very sad state of affairs.....

My own negative view of PAG attempting to control VW is unfortunately reinforced by this recent news.

Sad to say it, but PAG needs to merge with VW, WW needs to head for the exits.

I don't view PAG's attempts to obtain loans from the German government or investment backing from the ME as a positive development.

PAG needs to become a sport/luxury brand of VW, building 911's and Boxsters and a CGT replacement supercar...and maybe Cayenne's.  Panamera's?  Leave those projects up to VW and Audi.

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1997 993 TT Proto 3.8L 700HP

2005 996 TSCab EVO GT700

2006 Noble M400 "M600" 573RWHP

2007 Audi RS4 MTM SC 540PS

The problem is that VW is developing Audi into it's "sportbrand".

Once Porsche is absorbed by VAG, it's curtains!

No more prototype racing for Porsche - That spot is occupied by the Audi R15.

The Cup and CupS cars are direct rivals to the R8 (so guess which ones will have their development cut?)

The castrated motrosport program will eventually have reprocussions on the road cars.

It will be over!

Spyderidol:

 

 

The problem is that VW is developing Audi into it's "sportbrand".

Once Porsche is absorbed by VAG, it's curtains!

No more prototype racing for Porsche - That spot is occupied by the Audi R15.

The Cup and CupS cars are direct rivals to the R8 (so guess which ones will have their development cut?)

The castrated motrosport program will eventually have reprocussions on the road cars.

It will be over!

Sad indeed. Under a VWG assembly I would say that PAG should do sport cars only - no Panamera, no Cayenne. OTOH, Audi should not do sports cars either and it should absorb the Cayenne.

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A. Dias --- 997.2S (ordered). Previous cars: Corvette C6,  996 C4.

Spyderidol:

 

 

The problem is that VW is developing Audi into it's "sportbrand".

Once Porsche is absorbed by VAG, it's curtains!

No more prototype racing for Porsche - That spot is occupied by the Audi R15.

The Cup and CupS cars are direct rivals to the R8 (so guess which ones will have their development cut?)

The castrated motrosport program will eventually have reprocussions on the road cars.

It will be over!

If that passes... I think that the 997.2 series will be the last 911 we still love.

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A. Dias --- 997.2S (ordered). Previous cars: Corvette C6,  996 C4.

It's quite ironic that the man who was heralded as the "saviour"of Porsche could land up being it's destroyer!

I am very sceptical over Porsche's future within VAG (and so are the Porsche workers so it seems).

At this point, I would rather Porsche find a "sugar daddy" from the Middle East.

Spyderidol:

 

 

It's quite ironic that the man who was heralded as the "saviour"of Porsche could land up being it's destroyer!

I am very sceptical over Porsche's future within VAG (and so are the Porsche workers so it seems).

At this point, I would rather Porsche find a "sugar daddy" from the Middle East.

Correct on all counts!

A middle-eastern investor would be far better. PAG sells lots of product to Dubai and Bahrain fans. They could come to the rescue, have fun, and eventually make more money.

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A. Dias --- 997.2S (ordered). Previous cars: Corvette C6,  996 C4.

Another ironic twist to this tale, is that in 2000, Porsche actually had a LMP1 car that was ready and being tested. Rumor has it , that WW gave up the project at VAG's request in exchange for the sharing of the platform for the Cayenne.

Audi then developed and entered the R8 and eventually went on to win Le Mans and get it's foothold in Sportscar racing.

That decision by WW basically sealed the fate of Porsche...if it get absorbed by VAG.

I am not so pessimistic regarding Porsche being incorporated into VW. Porsche is a very powerful brand and VW wouldn't want to waste it. Audi is being promoted as a sports brand (like a new BMW) but it can never achieve the status of Porsche, because among other things it produces plenty of ordinary cars for the mass market. Even Mercedes has lost some of its allure with the A and B class cars.

So IMO Porsche under VW will be more exclusive and sportscar oriented than now. As regards racing there are all sorts of competition activities that each brand can find its place.

I think that Spyderidol is right. Audi will not relinquish its turf. I do not see much sense for 2 companies in the group to compete against one another in motorsports.

Unless PAG gets a different investor its days are numbered under VAG control. I can see Porsche evolving into the luxury GT lines and losing its basic sports appeal.

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A. Dias --- 997.2S (ordered). Previous cars: Corvette C6,  996 C4.

I sincerely hope that you are right reginos, but have you seen the following that Audi has in sportscar racing in the US?

They are one of the major sponsors of the ALMS. They have dominated LMP racing over the last decade. Most young fans are Audi fanatics, and don't even know exactly the strength of Porsche's heritage in this area.

The radio broadcasts (Radio Le Mans) is sponsored by Audi, so they don't only get favorable coverage, but it's also very extensive.

There are a host of journo's  covering ALMS that are Audi fans, and not at all Porsche fans.

The ACO have very pro-diesel regualtions for LMP1 cars. These regulations only suit Audi and Peugeot.

The ADAC changed the regulations for the 24 H Nurburgring to suite the GT3 Audi R8 against the GT2 RSR's. (and then called it a cost cutting measure! ).

Porsche has lost a tremendous amount of influence over the years. Thanks to Audi (VAG) and WW.

What is surprising to me is that this news came up out of nowhere.  Whatever happened to all that hedge funding stuff?  Did they use all they have to take over VW?

WW kind of reminds me of Wolfgang Schrempp when he took over Chrysler and not only caused MB to tank it also caused all this havoc for Chrysler too.

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Happy Driving

I'm wondering if the gamble with the Panamera will prove to be Porsche's downfall.

2005 997S Blk/Blk

Ron (Houston):

What is surprising to me is that this news came up out of nowhere.  Whatever happened to all that hedge funding stuff?  Did they use all they have to take over VW?

WW kind of reminds me of Wolfgang Schrempp when he took over Chrysler and not only caused MB to tank it also caused all this havoc for Chrysler too.

 

Indeed! I think that the hedge-fund short-squeeze was news because it wiped out a number of hedge-funds, another casualty of this debacle. When the short-squeeze was publicized PAG and WW were heralded as winners, but they were sitting on paper they could not sell and a mountain of debt nobody talked about that is now due.

What is also surprising is Wolfgang Porsche, Chairman of PAG and Porsche Automobil Holding SE claiming ignorance of the finance details. That has been the excuse of most Boards in recent times, but Wolfgang is always portrayed as a hands-on Board member who has an office in Zuffenhausen and goes there daily or very often. Sad indeed! 

Worse still is WW's claim of ignorance (at the very end of the Der Spiegel article). That should be grounds for his dismissal for cause and without any sort of golden parachute.

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A. Dias --- 997.2S (ordered). Previous cars: Corvette C6,  996 C4.

reginos:

I am not so pessimistic regarding Porsche being incorporated into VW. Porsche is a very powerful brand and VW wouldn't want to waste it. Audi is being promoted as a sports brand (like a new BMW) but it can never achieve the status of Porsche, because among other things it produces plenty of ordinary cars for the mass market. Even Mercedes has lost some of its allure with the A and B class cars.

So IMO Porsche under VW will be more exclusive and sportscar oriented than now. As regards racing there are all sorts of competition activities that each brand can find its place.

Agreed.  PAG under WW is already metamorphosing into a luxury GT brand.  Yes, it certainly can still create excellent trackworthy street cars (e.g., the 997GT2 and 997.2GT3), but those are becoming a tinier percentage of its overall production.

Certainly, PAG's workforce doesn't relish becoming part of the rank-and-file VAG workforce, but it's not as though VAG doesn't know how to build world-class sporty street cars (e.g., Audi R8, Lambo's).

1997 993 TT Proto 3.8L 700HP

2005 996 TSCab EVO GT700

2006 Noble M400 "M600" 573RWHP

2007 Audi RS4 MTM SC 540PS

Honestly, thinking of Porsche (my Porsche!) being a brand of VW/Audi...I am getting seriously scared. Facing the 12-month-anniversary-delay my PSE* for my 997.2, I already mentioned to my dealer that I am not planning to pick up my next 911 in Wolfsburg. 

On the other side, that is enterpreunership... 12 monthy ago Porsche, Wiedeking and Härter had been heroes for their VW plans, now they are the idiots... They played a game with high risk...no big risk, no big gain. Thats part of it. 

Porsche survived the area when 928 should replace 911 completely, 911 survived the 996 area... Porsche 911 will survive these times, with or without VW/Audi. 

Look at the recent 911 GT3. Porsche did not forget how to build sportscars!

* different topic....my 911 Carrera S (MY09) had been one of the first deliveries of the facelifted version last year...since July I am waiting for my (paid) PSE...

That is and will be our Porsche....the one and only  real Porsche!

Porsche CEO WW had leveraged a lot of cash in order to acquire shares of VW and when the credit dried up the markers were due and Porsche didn't have enough capital on hand. This was the end result of a high risk high return business model that had been routinely adopted by "we know better" young lions who paved over the more traditional and conservative managers they considered "obsolete".  I'm sure there is no love lost between Piech and Wiedeking, and as crisis is also opportunity, this financial meltdown may give Piech the leverage he needs to unseat yesterday's "golden child".  Piech can be unpredictable. If his goal is absorb Porsche into VW, he could easily "demote" Audi and favor Porsche. There is considerable flux at the moment to make any reliable predictions about Porsche's eventual status.

According to some rumors I got today, the merger talks between Porsche and VW continue and apparently they agreed to keep the media a little bit outside of the game.

Things aren't as bad as the press portaits it but they are bad enough to raise some serious questions about the possible future of Porsche and their products.

The Panamera development has been very expensive, no doubt about it and it is still unclear if this car will have the same success the Cayenne had when it was introduced.

I still think that the Panamera is too big and too ugly(sorry, had this same opinion about the first gen Cayenne but apparently people at that time cared more about the brand than about the looks) and that it is NOT a product which will have high demand in the current world financial crisis. I may be wrong though, time will tell. I saw a dark colored Panamera last sunday on the Autobahn A8 Stuttgart-Munich and this time I saw it a little bit from a distance. It looks HUGE and completely out of this world in my opinion, this is not a car for Europe or even the US, so I wonder if Porsche really thinks they can have success with it.

Looking at the current product line and comparing them with a little manufacturer like BMW, I wonder how Porsche can charge that much and not earn money with their cars?!

RC (Germany) - Rennteam Editor 997 Turbo, Cayenne Turbo S, BMW M3 Cab DKG, Mini Cooper S JCW

I kind of had a hunch this was about to happen. VW/AUDI/lambo are terribly positioned and way to confused and overlapping. Porsche should have bought Lambo and specifc interests in other manufactueres instead of trying to fulfill a egotistical family dream.

I dont think that the panamera is going to live up to the expectation of the cayenne. whoever wanted a practical porsche has got one already. the cayenne was king of the hill/segment for a pretty long time until the other automakers started catching up.

• cayenne started as top dog in its segment
• panamera will start as an underdog
• Porsche brand value was stronger and had more appeal in the past
• launch of panamera is at not so good time.

If they would have used a mid size or small size sedan, it would probably  have been more successful/profitable as they could have shared far greater parts with the 987/997 and use a cheaper vw/audi chasis.

my Conclusion,  sell short Porsche stock  until new 998 comes out

cheers

RC:

Looking at the current product line and comparing them with a little manufacturer like BMW, I wonder how Porsche can charge that much and not earn money with their cars?!

Have you seen WW's earnings.

Divide this by 100,000 units and assume how much HH and the rest of his team earn.

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It's not where you're going, it's how you get there that counts

Despite the obvious egos involved, I am confident that the relevant players will do what they have to do in order to resolve the problem. There is too much money at stake and in today's economic climate, surviving this recession will be hard enough without these companies making life even worse for each other. They are like squabbling grandchildren fighting over their inheritances. They may want to out-do each other but, at the end of the day, they still need each other.

Rennteam Moderator - 997.1 C2S Coupe GT Silver/Cocoa, -20mm/LSD, PSE, SportDesign rims, Zuffenhausen collection

Interesting article here.

http://seekingalpha.com/article/139571-porsche-at-risk-of-bankruptcy-unlikely-to-find-much-sympathy

Porsche at Risk of Bankruptcy, Unlikely to Find Much Sympathy

May 26, 2009

These days, liquidity is in short supply for all hedge funds, and it comes as no surprise the hedge fund wannabe Porsche (POAHF.PK) suffers from the same liquidity squeeze symptoms as many of its hedge fund brethren. The liquidity situation for Porsche will be critical over the next three weeks.

Recall that Porsche engineered a massive short squeeze of Volkswagen common stock (VLKAF.PK) just a few months ago. Volkswagen’s common had been shorted by arbitrageurs who went long the undervalued preferred at the same time. When Porsche announced that it had acquired 75% of Volkswagen through options and intended to take over the firm, the common stock soared while the preferred didn’t budge. This led to large losses for the hedge funds when they had to cover their short positions in the common.

The flipside of Porsche’s large position in VW option is that their exercise is coming up on June 19^th. Options on 23% of outstanding VW shares will expire that day, representing almost half the free float. Currently, Porsche owns 50.8% of the common. Most of the outstanding options are likely to be held by Porsche, which has announced that it controls some 75% of VW shares through direct ownership and OTC options. Many of the options are cash settled. The banks that sold Porsche the options are likely to have hedged themselves through exchange-traded options and also by acquiring underlying shares and hedging them with puts. This would explain the large number of outstanding puts with strike prices between Eur 100 and 800.

The risk is that the unwinding of the hedges on cash settled options will lead to massive selling of the VW shares. This would depress the value of Porsche’s holdings of VW, and flow through the income statement. Much of last year’s gains by Porsche were realized through the appreciation of VW shares during the short squeeze. Upon the expiration of the options, the opposite effect may happen, and Porsche will face losses of billions of Euros.

Porsche has debt of Eur 10bn, much of it incurred in the acquisition of VW shares. Porsche needs an additional Eur 2.5 billion in working capital to keep its business going. So far, only Bank of Tokyo has committed Eur 750 million.

It has now been made public that Porsche was already skirting insolvency in late March, when Eur 10bn of debt came due. Porsche was saved only when government-owned banks agreed to extend credit, and Volkswagen chipped in an Eur 700 million bridge loan that will mature in September. The Porsche / Piëch families own large stakes in both VW and Porsche. The Porsche family hypothecated parts of its Austrian dealership network for some of the loans. Although the seriousness of Porsche’s situation was not known at the time, the market did see an increased default risk for Porsche.

The question is whether Porsche will be able to raise sufficient capital in the next three weeks, and how large its cash needs will be upon the expiration of the options. Not all VW options are cash settled, so that Porsche will have to buy some VW shares at the strike price. There have been rumors that a middle Eastern investor might acquire a stake in Porsche. No names have been mentioned, but with Dubai having troubles of its own, we think it could be the KIA (Kuwait Investment Authority), which has owned a large stake in Daimler (DAI) since 1970.

VW’s CEO Piëch talked about a potential “insolvency” of Porsche as a result of its trading in VW shares. It is ironic that the engineers of one of the largest short squeezes now find themselves begging for liquidity only months after squeezing hedge funds by removing liquidity from VW’s common stock. Porsche is unlikely to find much sympathy for its plight.

It's extremely unfortunate that WW shifted his focus from building sport cars and operating the most profitable auto manufacturer to that of a deal maker. Let's hope that Porsche does not suffer long term effects from this..

 Fascinating post Ron. These hedge fund, short sell, and derivative transactions are as arcane and convoluted as it gets. Is it any wonder that top executives at major financial institutions did not fully comprehend the ramifications and vulnerabilities of their business should their economic assumptions prove false? 

The Porsche family (both clans) must solve this situation. After all they own the large majority of the Porsche stock and through that 50.8% of VAG.

WW is a pawn in this process - after all  his boss is Wolfgang who cannot dismiss his responsibility in this whole affair. Piech may be squeezing his cousin's throat right now, but at the end of the day the family will not lose. This will be sorted out well before the 19th of June, or else.

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A. Dias --- 997.2S (ordered). Previous cars: Corvette C6,  996 C4.

This is the chance for Ferdinand Piech to 'revenge' his father's fate in the hands of the Porsche family, he will not let Porsche off easy.

Whoopsy:

This is the chance for Ferdinand Piech to 'revenge' his father's fate in the hands of the Porsche family, he will not let Porsche off easy.

Piech's father was the finance guy and was never let down by Ferdinand or Ferry. Louise could not say the same about him though. I do not see what Ferdinand Piech has to revenge.

Ferdinand Piech is brilliant and has many talents but he is often prone to extreme actions and bombastic programs. Perhaps he resents his uncle removing him from director of motorsports, due to his overblown budgets, his motorsports success notwithstanding.

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A. Dias --- 997.2S (ordered). Previous cars: Corvette C6,  996 C4.